BASANT AGROTECH - A PENNY STOCK WITH HUGE POTENTIAL

 

 

In general ,I am not a fan of penny stock investing  and only very rarely spending time to study such stocks. In our stock exchanges 99 out of 100 penny stocks are worthless and punters are playing with it.This is where innocent retail investors are loosing heavily and ends with holding stocks of companies which are existing only in paper .But this time it is an exceptional case and I am recommending this  stock because of the potential of the industry in which it is operating and run by a decent management.This company is known as a fertiliser manufacturer and it is getting the valuation of a fertiliser company in stock market .But it is more than that , and only very few investors are aware about its other business .This company having sizable operations in hybrid seeds and it is one of the very few listed stocks from this sector .All of us  are aware about the potential of agriculture/farming  ,and the sharp run up of stocks like Kaveri Seed Company and Advanta  is a testimony of investors expectation about this sector.Diminishing area of farming and increasing demand for food is the possible scenario and it can be tackled only through scientific farming techniques.Hybrid seeds is a vital part of this revolution and the major tool for all efforts to increase productivity.Since we have discussed this subject more than once in the past I am not elaborating .

Basant Agrotech is a company based at Akola (Maharastra) and a member of 130 years old Bhartia Group.Company having three divisions – Fertiliser,Seeds and power generation.company having five fertiser manufacturing plants located at Kaulkhed , Kanheri , Sangli, Hospet and  Neemuch.In seeds division company’s processing plants are located at Nagpur  and Kanheri  and its R&D and Biotechnology lab located at Kaulkhed.Basant manufacturing NPK and SSP fertilisers .Even this sector having potential ,due to government control and all other uncertainties surrounding in this sector  let us leave this part and concentrate more on the other business – seeds-which is showing a robust growth rate in past few years .In 2011-12 financial year  this division shows a growth over  30 %  and touched a turnover of Rs.61 Cr (seeds division alone). Company’s product list includes 15 vegetable seeds (Bitter Gourd,Brinjal ,Okra,Tomato,water melon..etc) more than 10 field crops (Corn,Green gram,Mustard,Paddy,Wheat,Sorghum,Gram..etc) and oil seeds like Groundnut, Soyabean,Sunflower ,cotton..etc). Now company is paying all efforts to develop its seed business which ensures better margin compared with fertiliser.Cash flow is expected to increase in proportion of the growth of seed business .Company is  now planning to expand its marketing reach for seed division beyond its traditional markets.30% increase of seeds  sales in last year is an  indication of its sincere efforts to develop this business.Recently company also started selling seeds through online in association with e-bay  to meet retail demand.

Financials and Valuation

Company posted a sale of Rs.276 cr and a net profit of Rs.7.6 Cr in FY 2011-12 .It is an interesting point to note that in last five years Basant increased its turnover and profit continuously in every year without any interruption.Its sales moved from Rs.110 Cr in 2008 to Rs.276 Cr in 2012.This stock is currently valued at a market capitalization  of  just Rs.36 Cr where its last year turnover is above Rs.276 Cr .Even If we exclude its entire fertiliser business  and consider only seed business it is trading  at a market cap of just  half of the turnover of this division alone.

Icing on the cake

Whenever we think about  a penny stock we never look at the dividend part.But here the case is totally different .This company having an uninterrupted dividend history for the past five years and it increased the dividend pay out in every year in last three years.Current year it paid 8 % .Even this this not a big amount it is an indication of promoters attitude towards minority share holders.In many cases promoters are splitting the FV of a stock just to create volume for their  easy exit . Here too it is an exception ,in last four quarters they hiked their stake by about  5%  which is now stands at 55% and out of this not a single share is pledged.Even in non promoter category , a corporate entity named Basant Capital Tech Ltd acquired 1.17 % stake in latest June quarter .Even if this firm is categorized as non promoters , a detailed study revealing that the directors of this entity is same as the promoters of Basant Agro.

 

Conclusion

Many retail investors are throwing money in stock market  by investing in penny stocks even without considering  whether the company is existing  or not.I request all of you (if you have such a tendency) to invest in stock like this one and not in stocks like  C*** Re******** .Here, it is operating in a sector with huge potential (seeds) which is showing very good growth,dividend paying,promoter hiking stake ..etc.Even in the case of fertiliser sector (which is now  its main business) I believe we will get a clear picture about subsidy policy  in near future which will end the uncertainty and help  the company to take informed decisions.In short , buy it and forget it ,you will get dividend  every year  and either the market identify its seed business or the management decides to unlock value by de-merging  its seed business into a separate company  ,you may blessed with unexpected gains.Considering managements efforts to grow the seed business we can’t  write off such a chance when the seed division reaches a critical size.Current market price of Basant Agro is just Rs.3.85 which is close to its life time low. Even in this year  70,00,000 equity shares of Rs. 1/- each at a price  of Rs. 7.75 per shares  allotted to the promoters on conversion of  warrants. Current market price is only half of it and at  this price nothing to loose considering the potential gain.But as a thumb rule, invest only  what you can forget , in penny stocks.

Link to the company's new  website HERE

KAVERI SEED COMPANY - RESULT UPDATES

 KAVERI SEED COMPANY


Recommended @ Rs.272  and currently trading @ Rs.803 /- posted an increase of 114 % in net profit for the June quarter (Rs.101 Cr ) . Company's sales also  jumped 100% to Rs.480 Cr .June quarter EPS is Rs.74

For old posting ,Click HERE

KAVERI SEED COMPANY - UPDATE

CHAIRMAN'S SPEECH IN 23 rd AGM

Dear Stakeholders,

Hearty welcome to you all. On behalf of the Board of Directors of Kaveri Seed Company Limited and on my own behalf it is my privilege and honour to extend a very warm welcome to the 23^rd Annual General Meeting.  At the outset, I am thankful to all the shareholders of the Company for their whole hearted support and cooperation in furthering the overall growth and progress of the Company.

I am sure, you all must have gone through the Annual Report of the Company for the year 2009-10.  Your Company’s performance for the year under review has been quite satisfactory despite aberrant weather- failure of monsoon leading to drought followed by devastating floods, factors that destabilize agriculture.  It is heartening to note your Company’s business has significantly improved on operational performance compared to yesteryear and records a positive financial growth.  The year’s Gross Turnover of Rs. 165.00 Crores enhanced a growth rate of 32% where as the profit after tax Rs.29.07 Crores improved the growth rate of 16.77%.  The accomplished financial growth sustains the Company’s business and help attaining market leadership in seed and agribusiness.  Your Company will Endeavour to show remunerative pathways to shareholders as well as taking care of well being of farmers.  Investors in Kaveri Seed Company Limited can confidently look forward for robust and sustainable growth in the years ahead.   

The Indian Seed Industry is vibrant and grown over the years to become the fifth largest in the world with an estimated value of 1500 million US $ and an annual growth rate of 12% to 13 %.  India is one among the few countries in the world where the seed sector is well positioned with the potential to become global seed production hub, if nurtured carefully.  With the food crisis looming large world over, it is evident that the future rests with countries wielding grain power and those in agri business realize quality seed is the key to such empowerment.

Investment in Agriculture R&D is the most effective way of ensuring food security and economic growth.  The pressing need is for quality seed of varieties and hybrids that are not only high yielding but resilient to less input- water, fertilizers etc.  Thus food security is interwoven with the seed security.  The Kaveri Seed Company’s R&D targeted its research for developing hybrids that excel in the market with quality assurance.   Your Company with vast experience in seed production of major agricultural crops backed by a very strong in-house R&D program for crops-maize, cotton, sunflower, bajra, sorghum, rice and several vegetable crops nurtured a competitive edge in seed and agribusiness.  With over 600 acres of farm land owned by the Company and dedicated team of researchers, the Company is conscious of the changing needs of farmers and consumers to design and develop productive hybrids that fetch rewarding returns.  Being India’s leading National Seed Company, the R&D focus centers round combined use of conventional breeding and biotechnology to advance the yield frontier and stabilize it through incorporation of genetic resistance to biotic and abiotic stresses.  During the year under report, our R&D strived hard to accelerate to new and sustained levels of innovation as exemplified by the performance of pipe line hybrids in All India Coordinated Trials and commercial launching of premier hybrids.

Vegetable consumption, nationwide is increasing along with seed volume and value.  In view of demand for higher quality and more variety in vegetables, Kaveri R&D is laying new thrust to vegetables with emphasis on tomato, okra and chilly.  All of us anticipated approval for BT brinjal in India that is not to be.  Regardless of this development, commercialization of GM vegetables, particularly in developing countries like ours, is inevitable.  Despite current public opposition to GM technology, environmental, quality and production efficiency benefits will eventually favour wide adoption of the technology in the country.  Once the way is paved for Bt Brinjal, GM rice, maize, wheat and a number of vegetable crops follow the suit, heralding an era of biotech crops.  As biotechnology steers the breeding process in the near future, our R&D is being geared up by strengthening human resources and expanding the infrastructure.  A battery of transgenic containment units are getting ready at Gowraram and plans are afoot to build mega greenhouses for Flori and Olericulture.  Fortifying Bt cotton with herbicide tolerance (HT) and drought tolerance (DT) is our research agenda.  After Bt cotton it is the turn of hybrid rice with huge market potential.  Whatever may be the current seed production problems, they are not insurmountable. And we need to overcome to sustain the technological option for increasing food production.

On the product front, the Company is successful in launching two of its premier Bt cotton hybrids in the brand names of Jadoo and Jack pot and a pearl millet hybrid, Super Boss.  Sampada (red gram) Sampoorna (paddy) are the newly launched varieties.  Based on the performance at National level, two of our maize hybrids, Kaveri 50 and KMH 25K60 along with bajra hybrid, MH 1553 were identified by Varietal Identification Committee for eventual notification.

Germplasm is the genetic wealth of the Company.  The vast collection of germplasm that accrued over the year has been streamlined for conserving in “Gene Bank” In order to establish legal ownership of the Company’s hybrids and their parental lines, efforts are underway to registering the lines with PPV & FR authority.  Till date, ~ 100 applications were filed with PPV & FRA.

To augment natural resources-land and water, the Company has embarked on plans to bring more area under plough and judicious use of scarce water.  Towards this goal, farm area to the tune of nearly 120 acres has been brought under cultivation of crops for commercial production of seed.  The rain water harvest is in place for use in new cropped area.  In addition, drip irrigation has been extended to cover more area in Gundla Narasingpur farm and elsewhere.   

 Your Company is fully dedicated to improve the field and vegetable crops continuously. Besides corn and sunflower, cotton, pearl millet, rice, grain sorghum, mustard and various hybrid vegetables are part of our extensive product portfolio in which the company enjoys a sizeable share in the Indian seed market. Our vegetable crops include tomato, okra, hot pepper, water melon, bitter gourd and coriander.  The Company had made its presence in the market by releasing high yielding hybrids of these vegetable crops. In addition, to these products the Company has extended its business of Micronutrients and Bio-products to produce chemical –free and eco-friendly pesticides, fungicides and yield enhancers and thereby augmenting the product assortment.

Your Company is on the ascending path to reach new heights in seed and Agri- Business.  Your Company has recognized One among the Top 39 Indian Companies in the world leading business magazine of “Forbes Asia” published under a list of 200 top-performing small and midsize Companies in “Asia’s Best Under A Billion”.

I express my sincere gratitude to our shareholders, farmers, dealers, bankers, employees, the Central and State Governments and other regulatory authorities/agencies for providing continuous support at all times and look forward to have the same in our future endeavors.   I wish to express my sincere appreciation to my colleagues on the Board for their continued support.  I am grateful to you all for your cooperation and the trust that you have reposed in us.

Best Regards,

Sd/-

G.V.Bhaskar Rao

Executive Chairman.

FUTURE LEADERS OF INDIAN STOCK MARKET ?

Niche plays are always catching attention of the investor fraternity and commanding premium over others in stock market in any country. Everybody is confident about Indian growth based on the hard working of middle class to attain better standard of living and their  changing style of spending. Similarly everybody in stock market is aware that today’s small caps and mid caps are tomorrow’s leaders, if it is backed by efficient promoters and scalable business models. Below I am presenting eight such stocks which are expected  to turn as future leaders in 5-10 year time frame .All these stocks are familiar to all of you and most of them are trading with sufficient volume and market capitalization. This is not a recommendation to BUY these stocks at current level , but keep this in mind and take the advantage of any market correction going forward to build a portfolio .Companies promoted only  by Indians promoters(or changing management in favor of Indians) are included in this list.

(1) ONMOBILE GLOBAL

Experienced management ,undisputed leadership position , aggressive expansion through organic and in organic route  in a sector with huge opportunity is inviting attention to this MVAS player.

CMP                                       –             Rs .368

P/E Based on FY 2010           -                    40 X

-----------------------------------------------------------------------------------------------------------

(2)  TALWALKAR BETTER VALUE FITNESS

Increasing awareness of public about their  health , Good brand Name,Rapid expansion to tier II cities are positive for this company .

It was earlier recommended at Rs.162/-

CMP                       -      Rs 223/-

P/E Based on FY 2010           -            50 X

---------------------------------------------------------------------------------------------------------

(3) BIOCON

No need of explanation for one of the  India’s largest Bio-Pharma companies .Successful commercialization of its oral insulin program is expected to change its fortune which is now going through Phase III of clinical trials.

CMP         - Rs.445

P/E Based on FY 2010           -            35 X

--------------------------------------------------------------------------------------------------------------

(4) KAVERI SEED COMPANY 

This integrated agri company is catching attention mainly due to the future potential of the industry in which it is operating , strong R & D , reputed brand name, aggressive expansion plans and health of its balance sheet.We have discussed about it many times here .For more details ,search the blog.

CMP   Rs.335

P/E Based on FY 2010           -    16 X      

------------------------------------------------------------------------------------------------------------

5) JUBILANT FOOD WORKS.

It was one of the most successful IPO in last FY .The only pure listed company from the food service industry is the darling of FII’s and other institutional investors mainly because of the vast opportunities available in a highly populated country like India , backed by experienced promoters . Company is aggressively expanding its operations to countries like Sri Lanka ,Bangladesh ..etc. It also trying to clinch similar business relations  with some other  big brands of the west as in the case of  DOMINO’s.

CMP   Rs 507/-

P/E Based on FY 2010           -            92 X

-----------------------------------------------------------------------------------------------------------

6) CAIRN INDIA

India’s largest Non PSU oil producer is a hot subject among investors after the proposed takeover of  Vedanta  Group led by Anil Agarwal. The revival in world economies are expected to cause for a rise in oil prices and such an event will immensely benefit Cairn India.

CMP  Rs.335/-

P/E Based on FY 2010           -            60 X

--------------------------------------------------------------------------------------------------------------

7) YES BANK

A steady performer led by an able banker. The low density of banks in India is offering lot of chances for expansion of branch network. This new generation technology driven  bank will be one of the big beneficiary

CMP  Rs 370/-

P/E Based on FY 2010           -            24 X

-----------------------------------------------------------------------------------------------------------

8) FORTIS HEALTHCARE

Even if its previous attempt to become a global player by taking over Parkway Holdings  failed ,this health care provider is expected to grow exponentially under the leadership of young brothers in a sector with huge opportunity.

CMP     Rs 163/-

P/E Based on FY 2010           -            143 X--------------------------------------------------------------------------------------------------------

 Note :

If we follow the conventional methods of stock selection based on various valuation parameters ,none of the above may qualify for a BUY at present. But considering the opportunities available in these sectors where the mentioned  companies are operating and the ability of managements behind these companies may make wonders going forward . So keep an eye on these companies and try to catch them in any decent correction and keep for long term for wealth creation.

KAVERI SEED COMPANY - REPEAT

I have recommended a Buy and Hold on KAVERI SEED COMPANY from Rs.272/- level.Currently it is quoting around Rs.305/- .With a strong R&D,aggressive business strategies and an able management who knows the pulse of the agriculture sector - this is a stock to watch in any correction .I believe , KSCL is a perfect fit for those who are considering equity as an asset class and willing to hold for long term with patience to reap bumper crops.

Old report can be accessed HERE

KAVERI SEED COMPANY -RESULT UPDATE

KAVERI SEED COMPANY POSTED A TURNOVER OF RS.148 CR V/S 100 CR AND A NET PROFIT OF RS.31 CR V/S 23 CR. IN JUNE 2010 QTR.  NP IS HIGHER THAN LAST FULL YEAR FIGURE .BUY @ CMP 292/-

KAVERI SEED COMPANY - Repeat

I have recommended this company twice @ Rs.272/- and Rs.287/-.Currently it is quoting around Rs.300/-

Still I feels it is worth buy for long term investors ,hence earlier two write ups are re-produced below once again.
----------------------------------------------------------------

KAVERI SEED COMPANY – is one of the very few pure

listed  Indian  companies from hybrid seed sector.

Others from this sector are JK Agrigenetics ,Rallis,and

Advanta . Apart from these  other listed firms are

affiliates of foreign players like,Monsanto, Bayer

..etc. Kaveri Seed is a well managed Secunderabad

based firm promoted by Mr.GV Bhaskar Rao in 1976.

Company has grown a lot after that and now it is one

of the largest hybrid seed producer from South

India .Its product portfolio include seeds of

Corn, Cotton, Sorghum, Pearl Millet ,rice ,sunflower

and a wide variety of vegetables.Company also producing

various types of micro nutrients, plant hormones ,

bio-stimulants for different crops.Kavari also

producing organic plant protector under the brand

name ‘FIRE’. Other than this, company has a lot of

organic products to enhance yield from crops.

Recently Kaveri started operations in its  state

of an art facility for cob drying, seed processing

and cold storage which established in its owned 

farmland of 29 Acres in Medak district of Andhra

Pradesh. It added Red gram, onion, mustard and wheat

to is portfolio recently . This pure Indian player has

a very energetic R & D wing and introducing new

verities which can give good result even in bad

conditions like draught. Now in southern states of India

like Tamilnadu,Andhra and Karnataka ,precision farming is

gaining momentum and it is experienced as a great success.

This method requires hybrid seeds and scientific methods

of farming which is expected to bring big business to Kaveri.

                        In the financial front ,Company

is growing steadily and posted a turnover of Rs. 169 Cr

and a net profit of Rs.29 Cr in last financial year.

EPS for FY 2010 is Rs.21.20/-. Backed by good monsoon

compared with last year ,Kaveri is expected to post even

better result in this year. Its business is seasonal

and 90% income generated in first qtr.Company has an

equity base of Rs.13.7 Cr and out of this 63% is held

by promoters and 26 % by big investors including mutual

funds .Even from a low floating stock, promoters are

again buying from open market. In nutshell, with a clean

and dedicated management and excellent R & D Wing Kaveri

Seed  is a company to reap the benefits which is expected

to emerge in Farming sector ,going forward.This one stop

company for hybrid seed ,organic fertilizer and organic

pesticide  is quoting around Rs.272/-

--------------------------------------------------------------------------

I have received many queries from readers asking whether Kaveri Seed

Company is still a BUY after a  rise of RS.15/- from earlier

recommended price in just two days. Following are  some points

about the company :

 1)      The industry in which it operates have huge potential

        going forward

2)      There are only few listed players in this sector , and entry

      barrier is very high.

3)      Company having  a good ,aggressive and focussed management .

4)      It is growing steadily over past many years

5)       Its R & D is very strong  with 250 acres of land dedicated to

       R&D and  with State-of-the-art Bio-technology labs.

6)      Excluding promoter stake and shares held by large investors ,

      floating stock is just 10% of total equity

7)      Promoters bought shares in recent past from open market even

      at a price of Rs.290/-

8)  Kaveri is the cheapest stock available from this sector with

            a P/E of 13 (Monsanto - 28 ,Advanta 31 ,JK Agri in loss)
      9)  It is virtually a debt free company

     10)  Most importantly , Kaveri  is not a much publicized stock

            and many from investor  fraternity including analysts and
          

            business channels have  not celebrates it so far

The above are some of the points in favour of Kaveri Seed  ,

Considering the fact that its 90% income is coming from June

qtr alone and the result of this qtr is going to publish within few
days ,even at current price it is a

BUY and hold to grow with it  ,and not a stock to Buy today

and sell tomorrow or day after tomorrow. One negative

point is , Monsoon and  eather condition have great influence
in its business  and which can’t

be   controlled by anyone other than god.

KAVERI SEED COMPANY -UPDATE

I have received many queries from readers asking whether Kaveri Seed

Company is still a BUY after a  rise of RS.15/- from earlier

recommended price in just two days. Following are  some points

about the company :

 1)      The industry in which it operates have huge potential

        going forward

2)      There are only few listed players in this sector , and entry

      barrier is very high.

3)      Company having  a good ,aggressive and focussed management .

4)      It is growing steadily over past many years

5)       Its R & D is very strong  with 250 acres of land dedicated to

       R&D and  with State-of-the-art Bio-technology labs.

6)      Excluding promoter stake and shares held by large investors ,

      floating stock is just 10% of total equity

7)      Promoters bought shares in recent past from open market even

      at a price of Rs.290/-

8)  Kaveri is the cheapest stock available from this sector with

            a P/E of 13 (Monsanto - 28 ,Advanta 31 ,JK Agri in loss)
      9)  It is virtually a debt free company

     10)  Most importantly , Kaveri  is not a much publicized stock

            and many from investor  fraternity including analysts and
          

            business channels have  not celebrates it so far

The above are some of the points in favour of Kaveri Seed  ,
Considering

the fact that its 90% income is coming from June qtr alone and the
result

of this qtr is going to publish within 20 days ,even at current price it is a

BUY and hold to grow with it  ,and not a stock to Buy today and sell

tomorrow or day after tomorrow. One negative point is , Monsoon and

weather condition have great influence in its business  and which can’t

be   controlled by anyone other than god.

 EARLIER WRITE UP CAN BE ACCESSED HERE